IOSR Journal of Business and Management (IOSR-JBM)

e-ISSN: 2278-487X, p-ISSN: 2319-7668. Volume 17, Issue 2.Ver. I (Feb. 2015), PP 77-89
www.iosrjournals.org

Effects of Strategic Procurement on Competitiveness of

Commercial Banks Operating In Kenya A Case Study Of
Standard Chartered Bank Limited Kenya
Timothy Tarus Seurey
Jomo Kenyatta University of Agriculture and Technology, Kenya

Abstract: Material price volatility, pressure on profits, increasing risk profiles in global markets, a depressing
need to innovate and become more sustainable. These are causing executive management to take another look
at the contributions procurement departments are making and not just to cost savings. Generating cash by
reducing costs may always be the main duty. But the other contributions procurement can make are substantial,
from product and service innovations to enhanced productivity to shortened delivery times (Hoek 2011).
This study looked into the effects of strategic procurement on competitivess of commercial Banks operating
Kenya. The target population for this study was employees of Standard Chartered Bank Kenya based in Nairobi.
The target population consisted of all cadres of employees. The bank has a total of 482 employees with
procurement rights of whom 304 are based in Nairobi and were the target population for this study.
The primary data was collected by use of questionnaires. A descriptive design was used to collect both
qualitative and quantitative data. Data was coded, cleared and entered using statistical package for social
sciences (SPSS) version 22. The results was analyzed and results presented using tables and figures. The study
also used Pearson coefficient to establish the relationship between the variables.
The study established that strategic procurement indeed influences competitiveness of commercial banks
operating in Kenya. Strategic procurement was viewed as non- strategic level amongst commercial banks
operating in Kenya. Strategic sourcing has not been embraced in sourcing of materials and services, supply
chain management is regarded as a strategic senior level position. E-procurement is not well utilised in cost
cutting and reduction of turnaround time with employees lacking adequate knowledge regarding E-procurement
and its operations. However the firm doesnt believe is supplier development and partnership.
Keywords: strategic sourcing, supply chain management, E- procurement, supplier relationship management.

I.

Introduction

That bank executives generally tend to ignore the strategic relevance of procurement should hardly be a
surprise. Their focus is on growing market share, on the net consequence, they recruit, train, and compensate
their personnel to fulfill core banking activities: collecting deposits, lending money, providing fee-based
services. Moreover, during their careers, banking executives generally ascend through a series of line positions:
credit, deposits, investments, commercial services, accounting, and marketing. It is a safe bet, however, that no
bank president has ever done a stint in purchasing, which is unfortunate in that it ignores what banks spend the
most money on day-in and day-out (FIS Consulting 2012).
Strategic procurement can be approached from three main dimensions namely: Development and
management of key suppliers, internal operation of procurement function and coordination of purchasing with
other functions within the firm, and efforts to meet or exceed customer expectations. It is seen as one of the
critical function of an organization with the potential to; save cost, improve operational efficiency, access to
trusted suppliers, and improve in quality of product or service, sharing of best practices among others (Magnus,
B. 2006). The representation of the strategic procurement can be described in terms of its environment and
structure, and what activities take place in the supply link. General performance indicators of the supply link in
terms of time, quality, flexibility and cost are used to measure efficiency and effectiveness. The efficiency in the
supply link explains how well the resources are utilized. Since resources are scarce, it is in everyones interest
in the organization to maximize the utilization of the resources. The effectiveness of the supply link explains
how well the objectives are achieved (Arun, K. and Linet, O. 2005).
In developing an effective strategy that enhances a companys long-term profitability, Porter (1979)
suggested that a firm must position itself where the forces of competition are weakest, exploit changes in the
forces and reshape the forces in their favour. Porter argues that there are five competitive forces that shape
strategy; powerful customers, powerful suppliers, threat of new entrants, threat of substitutes and rivalry among
existing competitors.Awareness of the five forces can help an organization understand the structure of its
industry and stakeout a position that is more profitable in the long-term and less vulnerable to threats. The
strongest competitive force or forces determine the profitability of an industry and become the most important
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Effects of Strategic Procurement on Competitiveness of Commercial Banks Operating In Kenya

to strategy formulation. The banking industry in Kenya is one of the most dynamic and important industries to
the economy.
The industry has recently experienced phenomenal growth and is one of the fastest growing industries
in Africa. The growth has mainly been supported by the expansion of banks into new market segments and
especially in East Africa, prudent risk management and enhanced economic prospects. The Central Bank of
Kenya (CBK) expects the banking sector to continue on this growth and especially due to ongoing reforms and
initiatives by the Government and itself that will serve to further propel the banking sector to new frontiers.
Standard Chartered Bank Kenya (SCBK) is a subsidiary of Standard Chartered PLC. Standard Chartered PLC is
a multinational banking and financial services company. While the bank is incorporated in the United
Kingdom, the bank mainly operates in Asia, Africa and the Middle East with the majority of its profits coming
from these regions. The Standard Chartered Bank Kenya Limited was established in 1911 with the first branch
opened in Mombasa Treasury Square. The chief executive officer is Lamin Manjang and the chair of the board
of directors is Anne Mutahi (Standard Chartered bank limited (K) 2014).
The Standard Chartered Bank Kenya Limited is one of the leading banks in Kenya, with an excellent
franchise and brand. It has a total of thirty eight branches spread across the country, ninety automated teller
machines (ATMs) and one thousand six hundred and ninety eight employees. The bank has local shareholding
of about twenty six percent and has been a public quoted company on the Nairobi Securities Exchange since
1989. The bank trades under the symbol SCBK (Standard Chartered bank Limited Kenya)
Statement of the Problem
Senior banking executives face a vexing dilemma. In this difficult environment, there is great urgency
to reduce costs and improve efficiency. But cutting indiscriminately or too deeply may severely hamper the
ability to grow revenues when the economic outlook improves. Arbitrary cost reduction based on rationales of
"sharing the pain equally across the organization is longer sufficient, and risk cutting muscle as well as fat
(Accenture2008). The differentiating power of procurement is no longer in bringing down prices only. Whats
needed is a different attitude to external partneringunderstanding the market environment, your vendors, their
strategies, and what makes them tick.
The success of e-procurement solutions has not been as great as expected, a lot of businesses are still
relying on to traditional procurement when it comes to the purchasing of indirect goods. In todays fluctuating
economy, increased investment in new technologies and tighter control on spending (Davila 2003). Strategic
sourcing is instrumental in bolstering procurement maturity through quality improvement and risk reduction
from the supply chain. There is need to have a proper management of supply chain in order to curb risks and
mitigate risks. A robust supply chain risk management process include a supplier-monitoring framework that
includes financial and operational data, industry information, and on-site reviews and the ability to analyze risk
data against established limits and industry warning signs and identify suppliers that fall outside risk limits. The
more we can plan, the better cost control we can have and the better we can mitigate impact to our plants and,
most importantly, mitigate impact to our customers (CPO Rising 2011).
Kakwezi and Sony (2010) found out that procurement planning is an ingredient to service delivery, but
the study focused on service delivery ignoring other measures of strategic nature of procurement like financial
gains from cost reduction. On the other hand, Nantage (2011) asserts that strategic procurement management
has a direct impact on the financial performance of Banks in Uganda. It is critical to replicate the study in a
different setting and find out if the same recommendation holds among the commercial banks in Kenya. Hassan
(2012) concluded that procurement planning and strategies have a direct positive impact on the performance of
humanitarian organization in delivery of relief and emergency services. The study did not bring out the strategic
procurement practices to use to realize these benefits. Further, it will be prudent to expand the study and cover
other sectors of the Kenyan economy. It is clear from these studies that a lot of research has been conducted on
strategic procurement but focused on different aspects and countries other than strategic procurement in the
banking industry.
The purpose of this study therefore is to bridge the research gaps by trying to relate procurement
strategies and the competitiveness amongst commercial Banks operating in Kenya, and more so dig deeper on
what procurement strategies banks needs to concentrate for it to be competitive, also find out the challenges
regarding adoption of procurement strategies and its benefits of strategic procurement amongst commercial
banks operating in Kenya.
General Objective
The study seeks to determine the role of strategic procurement on competitiveness of commercial banks
operating in Kenya.

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Effects of Strategic Procurement on Competitiveness of Commercial Banks Operating In Kenya

Specific Objectives
i.
To identify the role of strategic sourcing on competitiveness of commercial banks operating in Kenya.
ii.
To analyze the impacts of supply chain management on competitiveness of commercial banks operating
in Kenya.
iii.
To assess the role of E-procurement on competitiveness of commercial banks operating in Kenya.
iv.
To identify the role of Supplier relationship management on competitiveness of commercial banks
operating in Kenya.

II.

Literature Review

Strategic Sourcing
Strategic sourcing is defined as the process of planning, implementing, controlling, and evaluating
highly important purchasing in an effort to meet a firms goals (Carr and Smeltzer, 2000; Carr and Pearson,
1999 and 2002). A number of articles address the need for purchasing to assume a more strategic role (Carr and
Smeltzer, 2000; Carter and Narasimhan, 1994, 1996a, and 1996b; Ellram and Carr, 1994; Narasimhan and Das,
1999; and Pearson and Gritzmacher, 1990).
Strategic sourcing is increasingly seen to be a business capability of firms. Sourcing if properly
structured can effectively combine the core competencies of a given firm with the skills and capabilities of its
suppliers. Sourcing decisions are vital for any organizations that want to leverage on its core competencies and
outsource other activities in order to gain and retain competitiveness (Pillania 2008). Strategic sourcing is
probably the most significant aspect characterizing an organizations transformation to supply management. It is
also this aspect of supply management which provides some of the most value-added benefits to the
organization.
Sourcing activities includes analyzing expenses, identifying potential suppliers, requesting quotations,
negotiating contracts, monitoring and improving suppliers (Kumar et al., 2003). Strategic sourcing aims at
streamlining sourcing and purchasing activities to support the total supply chain vision to service the ultimate
customer. It aligns the sourcing operations to support overall organizations strategy and service level
(Kocabasoglu, 2002; Ellram and Carr, 1994; Pearson and Gritzmacher, 1990). Strategic sourcing aims at
identifying and selecting suppliers for long-term partnerships, engages in early involvement of suppliers and
supplier development by effectively allocating resources to enhance supplier performance. It provides
benchmarks and continuous feedback to suppliers and in some cases engages in supplier pruning activities
(Tomas and Hult, 1998; Talluri and Narasimhan, 2004). Strategic sourcing architecture upholds the competitive
profile of the company and develops, interconnect and manage the rings constituting the chain (De Toni et al.,
1994).
Narasimhan and Das (1999) investigated the influence of strategic sourcing and advanced
manufacturing technologies on specific manufacturing flexibilities. The findings suggest that strategic sourcing
can assist in the achievement of modification flexibilities. Strategic sourcing can be used to target specific
manufacturing flexibilities. Das and Narasimhan (2000) developed purchasing competence as a valid construct
and explore its relationship with different manufacturing priorities. An empirical study is conducted among
purchasing professionals in manufacturing firms. The results of the research indicate that purchasing
competence is found to have a positive impact on manufacturing cost, quality, and delivery, as well as new
product introduction and customization performance. Purchasing integration, a component of purchasing
competence, is found to relate to all dimensions of manufacturing performance.
Supply Chain Management
In the todays market dynamism and competitive scenario supply chain management assumes a
significant importance and must calls for serious research attention, as companies are challenged with finding
ways to meet ever-rising customer expectations at a manageable cost. To do so, businesses must search out
which parts of their supply-chain process are not competitive, understand which customer needs are not being
met, establish improvement goals, and rapidly implement necessary improvements. Jain, Dangayach, Agarwal,
Banerjee (2010).
Previously manufacturers were the drivers of the supply chain - managing the pace at which products
were manufactured and distributed. Today, customers are calling the shots, and manufacturers are scrambling to
meet customer demands for options/styles/ features, quick order fulfillment, and fast delivery. Manufacturing
quality - a long-time competitive differentiator - is approaching parity across the board, so meeting customers
specific demands for product delivery has emerged as the next critical opportunity for competitive advantage.
Companies that learn how to improve management of their supply chain will become the new success stories in
the global market place. Study on Benchmarking shows significant cost differences between organizations that
exhibit best-in-class performance and those with average performance. Jain, Dangayach, Agarwal,
Banerjee(2010).
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Effects of Strategic Procurement on Competitiveness of Commercial Banks Operating In Kenya

Traditionally, Supply Chain Management (SCM) has been a melting pot of various aspects, with
influences from logistics and transportation, operations management and materials and distribution
management, marketing, as well as purchasing and information technology (IT). Ideally, the all-encompassing
philosophy of SCM embraces each of these functions to produce an overall supply chain strategy that ultimately
enhances firm performance (Croom et al., 2000; Wisner and Tan 2000). In actuality, the literature is still very
fragmented and although several studies purport to discuss supply chain issues, most of the existing research
only examines one link of the chain, or most importantly only focuses on one ingredient in the supply chain
performance mix. Six major movements can be observed in the evolution of supply chain management studies.
Creation, Integration, Globalization and Specialization.
To address inconsistent definitions of sustainability in existing literature of supply chain management,
Carter and Rogers (2008) came up with the concept of true sustainability. They argued that consideration of
environmental and social issues should be coupled with economic objectives and incorporated in companys
strategic long-term planning (Carter and Rogers 2008). Such definition of sustainability is though not new and
based on the well-known idea of triple bottom line (TBL) perspective. Seuring and Muller (2008) have also
noticed high diversity of sustainability comprehension in supply chain management and referred to the triple
bottom line approach, where a minimum performance is to be achieved in the environmental, economic and
social dimensions. This can be comprehended as being in line with the notion of order qualifiers a company has
to fulfill before it is able to even compete for orders.
E-Procurement
E-Procurement refers to the use of Internet-based (integrated) information and communication
technologies (ICTs) to carry out individual or all stages of the procurement process including search, sourcing,
negotiation, ordering, receipt, and post-purchase review (Croom& Brandon-Jones, 2004). While there are
various forms of e-Procurement that concentrate on one or many stages of the procurement process such as eTendering, eMarketplace, e-Auction/Reverse Auction, and e-Catalogue/Purchasing, e-Procurement can be
viewed more broadly as an end-to-end solution that integrates and streamlines many procurement processes
throughout the organization. Businesses have realized that time and cost savings can be achieved by having a
link with major suppliers through private networks such as electronic data interchange (EDI). The internet has
enabled firms to even centralize their procurement and logistics systems that previously conducted in every
country they operated. Driven by the increasing trend toward purchasing inputs and other raw materials from
outside the organization, implementing electronic procurement (e-procurement) has become a significant tactic
in most companies e-business strategies (Deloitte Consulting, 2001)
Internal customer satisfaction, through E-Procurement function can usually contribute to the
competitive position of any company in many other ways than first through cost serving Van Weele (2005)
presents a few of these was such as: reduction of quality cost e-procurement can reduce quality costs by
making sure that selected suppliers deliver a product of service that does not exceed extensive quality control.
E-Procurement can also reduce quality costs by making sure that the components bought do not load to
complaints on the user department or final product to the customer. Product standardization internal customer
satisfaction can be enhanced through E-procurement due to the product variety concept. This can be achieved by
reducing the number of different components and or the number of suppliers via set product standards.
Contribution to product design and innovation of then innovation in industry come from suppliers or are results
from intensive interactions between suppliers and user department in any organization. By actively encouraging
this kind of interactions E-Procurement can contribute to fast and to continued innovation and improvement of
product and user satisfaction.
E-Procurement system is a compound application that contains many usable functions to assist
company in processing the activities of purchasing transaction. The use of a Web-based procurement system can
strengthen search ability, facilitate faster and more accurate data transmission, provide quicker and more
plentiful information, and achieve relatively low communications and coordination cost. Hence, Web-based
procurement mainly affects four of the organizations major B2B tasks: search, purchase processing, monitoring
and control, and coordination (Subramaniam and Shaw 2002).
E-procurement has covered procurement automation for internal organizational processes, and supplier
collaboration for inter-organizational processes. The former addresses automated, paperless internal process
from end user item selection, to creation and routing of purchase request and approval to purchase order
creation, and receiving. The latter is about connectivity with suppliers for electronic catalogs, transaction
management and on-going relationship management. To realize the benefits of Web-based e-procurement, an
understanding of the impacts influencing the value forming is needed so that the solution may be developed to
facilitate the implementation of Web-based e-procurement system (Subramaniam and Shaw 2002).

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Effects of Strategic Procurement on Competitiveness of Commercial Banks Operating In Kenya

Supplier Relationship Management
The study of supplier-customer relationships has shifted from a focus on the organizational traits
associated with relationships to a focus in which personal trust between the parties has been acknowledged as an
important ingredient (Ganesan 1994; Handy 1995; Heide and Miner 1992; Kumar et al., 1995). McAllister
(1995) concluded that trust occurs in cognitive and affect-based forms. The former has its roots in reliable role
performance, cultural-ethnic similarity, and professional credentials, while the latter is a function of individual
behavior and interaction frequency. Both forms were found to enhance coordination by lowering administrative
costs. Coordination is related to trust through boundary definition, and reflects the set of tasks each party
expects the other to perform (Mohr and Spekman 1994). Trust has also emerged as an important component of
supplier/manufacturer relational exchange norms (Young, Gilbert, and McIntyre 1993), and firms are beginning
to acknowledge the importance of trust and coordination in cooperative relationships (Pilling and Zhang 1992).
Gulati (1995) found that suppliers and customers are less likely to use equity sharing agreements as
they gain more experience with each other through ongoing relationships. Moreover, greater familiarity
between the parties bred trust, which replaced legal relationships. The underlying theme of these studies is that
trust develops when tangible benefits appear to both parties from the business relationship. Interestingly, even
as firms increase the length of their agreements, research has concluded that many supplier/customer
relationships are still characterized by a lack of trust (Coviello et al., 2002). Thus, opportunistic behavior by
one party can lead to a lack of trust by the other party (Stump and Heide 1996).
Communication and the sharing of information are fundamental to most aspects of supplier-customer
relationships (Kapp and Barnett 1983; Mohr and Nevin 1990). Indeed, it has been proposed that the exchange
of information between the parties serves to "create" a necessary environment for the conduct of business
relationships (Pfeffer and Salancik 1978; Weick 1969). Therefore, as boundary spanners exchange information,
that information provides cues to the other party as to what the communicating boundary spanner considers
important to his/her organization and the relationship.
Dependence exists when one of the boundary spanners does not entirely control all of the conditions
necessary for achievement of a desired outcome performed by the other party (Emerson 1962; Ganesan 1994).
Resource dependence theory specifies the conditions under which one unit is able to obtain compliance with its
demands when dependence between the parties is present (Pfeffer and Salancik 1978). Three critical factors that
affect the degree of perceived dependence include the importance of the resource, the extent to which the group
has discretion over the resource, and the extent to which there are limited alternatives. For instance, Provan and
Skinner (1989) found that dealers of agriculture equipment were less opportunistic when they depended on a
primary supplier, whereas suppliers with greater control over dealers' decisions exhibited greater opportunism.
Therefore, as the dealer became more dependent on the supplier, they chose to minimize their opportunism in
the supply market and limit their business with the supplier. However, those that sense guaranteed business
from a dependent supplier or customer will pursue opportunities for other business relationships at the expense
of the existing relationship. Also,
The influence of asset specificity on organizational relationships was originally described by
transaction cost theorists (Williamson 1979), and the concept was later extended to help explain the formation of
"clans" (Ouchi 1980).

III.

Research Methodology

Research Design
The study adopted a descriptive survey research design. According to Creswell (2002) descriptive
survey design is designed to describe the characteristics or behaviours of a particular population in a systematic
and accurate fashion. Shaughnessy et al. (2003) note that the results of a survey research are often used to
describe peoples opinions and preferences. Descriptive survey studies are preferred by researchers as they
enable collection of data about a large number of people. Survey researchs principal strength is the ability to
generalise about an entire population by drawing inferences based on data drawn from a small portion of that
population. Accuracy of inferences made from data collected from surveys depends on careful selection of the
research sample.
The research used questionnaire to conduct a research, a survey research design provides a quantitative
or qualitative description of trends, attitudes or opinions of a population by studying a sample of that population.
Therefore, descriptive research uses questionnaires to collect data about peoples attitudes, beliefs, feelings,
behavior and lifestyles. Descriptive research can be either quantitative or qualitative or both. According to
Mugenda and Mugenda (2003) qualitative and quantitative research is used simultaneously in situations where
the study has several objectives. This study, through descriptive research design, attempted to describe Standard
Chartered Bank employees view of Standard Chartered competitiveness through strategic procurement.

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Effects of Strategic Procurement on Competitiveness of Commercial Banks Operating In Kenya

Population
This study was conducted in Nairobi because Standard Chartered procurement office because most
purchasing and supplies operations is done in the capital city of Kenya. Besides housing the head office, twenty
(20) out of the thirty eight (38) banks branches are located there. The target population for this study was
Standard Chartered Bank Kenya based in Nairobi because they directly deal with procurement functions. The
target population consisted of executive management, procurement managers, branch managers, line managers,
operations managers and employees who directly influence procurement functions. The bank had a total of 482
employees who directly deal procurement of whom 304 are based in Nairobi and was the target population for
this study.
Sample Size
The study employed cluster sampling method where 34 SCBK employees based in Nairobi out of the
304 target population were used to conduct this study, which represented 11 percent. This sample size fell
within Smiths (2004) recommendation of between 10-30% of the targeted population in a survey research. The
study sampled seven of the 20 branches in Nairobi and this represents 35% of Nairobi based branches and will
be considered adequate as Shaugnessy et al., (2005) point out that 30 percent of the population yields adequate
sample when carrying out a descriptive study. The banks records on number of staff in Nairobi branches
indicate nine of the branches had more than 30 employees. The 7 branches were selected because they had
larger staff numbers and hence diversity in responses was expected.
The study used simple random sampling to select seven branches from which data was collected.
Specifically, the study used a random number table to select seven branches from which data was collected. Due
to the nature of work and varying procurement rights each employee has, judgmental sampling was preferred to
intentionally pick two senior management staff where they provided crucial information deemed critical for this
research. Purposive and judgment sampling was used in selecting the two interviewees. This research
interviewed the banks Head of country sourcing and Head of operations Kenya.
Sample and Sampling Techniques
A study sample was selected from a sampling frame. According to Shaughnessy et al. (2003) argues
that the extent to which the sampling frame reflects the population of interest determines the adequacy of the
sample the researcher ultimately selects. The sample helped in lowering cost, greater accuracy of results, and
greater speed of data collection and inaccessibility of population elements in this study, the sampling frame
consisted of 304 employees of Standard Chartered Bank based in Nairobi. For the study to effectively collect
data from this target population a representative sample was selected from which the data collected was
analyzed and generalised to the entire population.
Probability and non-probability sampling was used to select a sample; Probability sampling approach
emphasized on random selection of participants from the population. The study intended to collect data from
employees of Standard Chartered Bank on the assumption that all employees had opinions, perception and
attitudes towards strategic procurement. Therefore the study sought to find out how SCBK employees can view
the effects of strategic procurement on competitiveness of commercial banks operating in Kenya hence each
employee needs to be given an equal opportunity to be sampled for the study. The study used simple random
sampling method to select the 32 employees from seven branches involved in this research. This sampling
technique provided an equal chance for all the selected branch employees with procurement rights to participate
as respondents in this study. All the names of the employees in the selected seven SCBK branches in Nairobi
were assigned a unique identification number. A random number table was used to select 32 employees in 7
branches and use of judgmental sampling to select 2 employees who participated in this study giving a total of
34 respondents who formed the studys sample.
Data Collection
The researcher will collect primary data using a structured interview guide (closed ended), unstructured
(open ended) questions and by observation. Ten line managers from the various functions of the bank will be
targeted as the interview respondents. The researcher will conduct the interviews and the direct observation in
person. Secondary data will be collected from already existing materials such as companys website, companys
reports and announcements and other external sources such as the media.
Data processing and Analysis
Data was analysed using both qualitative and quantitative techniques. Qualitative data was analysed by
giving explanation of information obtained from the empirical literature. Quantitative data was analysed using
descriptive statistics and inferential statistics with the help of Statistical Package for Social Sciences (SPSS)
version 22.
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Effects of Strategic Procurement on Competitiveness of Commercial Banks Operating In Kenya

This will be done through editing and coding variables into common themes to facilitate generation of
statistics (Obure, 2002). Statistics in terms of correlations, frequency and percentages was generated to reveal
the distribution trend in the variables under study. The output was presented in tables and charts and
interpretations will be done based on study objectives and research questions
In order to produce useful results, the researcher ensured that the questionnaire was reliable and valid.
Principal axis factoring method with varimax and equimax was used to examine the validity of the questionnaire
in SPSS. Reliability will ensure that the questionnaire instrument has internal consistency while validity will
ensure that the questionnaire measures what it is intended for. Results will be presented in tables, pie charts,
graphs and percentages to ease comprehension.

IV.

Research Findings And Discussion

This chapter presents the findings obtained from primary data. Data collected were both qualitative and
quantitative. The data was analysed using SPSS version 22 among which included: correlations, frequencies
inform of tables and also use of chart builders in inform of histograms, bars and pie charts
Response Rate.
A total of 34 questionnaires were given out to the SCBK employees in five departments with access
and rights of procurement systems in SCBK Nairobi, all questionnaires were filled and returned giving a
response rate of 100%. According Mugenda and Mugenda(1999), a response above 50% is adequate, 60% good
and above 70% is very good. Based on this assertion the response rate for this study can be said to be very good
at 100%.
Social Demographic Characteristics.
The researcher sought to know of the level of years worked in the organization so as to gauge the level
of experience and knowledge the respondent. Whereby 41% of the respondents are above 10 years, 44% of the
respondents are between 5 to 10 years while below the age of 10 years in the organization are 15%. This
indicated that 85% of the respondent are experienced and understand how procurement works in the
organization. The main reason of large number of experienced staff is that SCBK believes in staff retention and
employee development which motivates staff thus reducing staff turn out. Therefore this was concluded that
most employees had reliable working experience. There were significantly high number of male respondents as
compared to the male respondents which is reflected by 68% of the respondents being male and 32% of the
respondents being female. This was attributed by the fact that there is a lot of male dominance in key positions
in the banking industry.
There was high number of respondents from operations department representing 41% of the
respondents, business clients representing 18%, corporate clients being 14%, SME consisting of 12%,
compliance 9% and sourcing 6%. This was based from the population size of each department. The reason why
there is high percentage of respondents from operations, business clients and corporate department is because of
high number of the have rights and frequently access and use procurement systems. This chapter presents the
findings obtained from primary data. Data collected were both qualitative and quantitative. The data was
analysed using SPSS version 22 among which included: correlations, frequencies inform of tables and also use
of chart builders in inform of histograms, bars and pie charts.
Role of Strategic Sourcing on Competitiveness of Commercial Banks Operating In Kenya.
The study sought to investigate the role of strategic sourcing on competitiveness of commercial banks
operating in Kenya. On the aspect of strategic suppliers meeting regularly with the top executives, if there are
Specific strategies employed for the sourcing function, if purchasing and supplies function participates in
strategic setting group meetings, whether Purchasing and supplies function takes part in entry evaluation into
new markets or new line of business, the firm is shifting towards end-item focus instead of commodities and
whether there is emphasis on purchasing and sourcing systems development. From the basis of findings we can
attest that an average of 47.1% indicated very the organization is very poor in adoption and implementing of
strategic sourcing. Whereas 14.7%, 29.4%, 5.9% and 2.9% citing poor, good and very good respectively.
Correlation Coefficients Between Strategic Sourcing Adoption And Strategic Procurement
Competitiveness.
Table 1 Correlation Coefficients Between Strategic Sourcing Adoption And Strategic Procurement
Competitiveness
Strategic
suppliers meet
regularly with

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group comes to an
impasse based on

There are specific

strategies employed
for the sourcing

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Effects of Strategic Procurement on Competitiveness of Commercial Banks Operating In Kenya

Strategic suppliers
meet regularly with
top executives
strategic setting group
comes to an impasse
based on cost targets
There are specific
strategies employed
for the sourcing
function.
Emphasis on
purchasing and
sourcing systems
development.

Pearson
Correlation
Sig. (2-tailed)
N
Pearson
Correlation
Sig. (2-tailed)
N
Pearson
Correlation
Sig. (2-tailed)
N
Pearson
Correlation

top executives

cost targets

function.

development.

.958**

.857**

.962**

34
.958**

.000
34
1

.000
34
.876**

.000
34
.946**

.000
34
.857**

34
.876**

.000
34
1

.000
34
.901**

.000
34
.962**

.000
34
.946**

34
.901**

.000
34
1

.000
34

.000
34

34

Sig. (2-tailed)
.000
N
34
**. Correlation is significant at the 0.01 level (2-tailed).

There was a positive correlation between Strategic suppliers meeting regularly with top executives and
emphasis on purchasing and sourcing systems development with a correlation figure of 0.962, it was clear that
there was a positive correlation between the Strategic suppliers meeting regularly with top executives and
strategic setting group comes to an impasse based on cost targets as shown by a correlation figure of 0.958, it
was also clear that there was a positive correlation between the Strategic suppliers meeting regularly with top
executives and specific strategies employed for the sourcing function. With a correlation figure of 0.857, where
p = 0.000 hence significant at 0.01 level. This shows that there was positive correlation between the variables.
From the findings it is clear that strategic sourcing has never been embraced by commercial banks
operating in Kenya. They view the process of planning, implementing, controlling, and evaluating highly
important purchasing in an effort to meet a firms goals as non-strategic. The firms Executive management
rarely meet and discuss with strategic suppliers regarding key purchases, they have rather channeled most of
their energies to marketing, lending and customer services. However there are no specific strategies employed
for the sourcing function as sourcing decisions not vital for the organizations that want to leverage on its core
competencies and outsource other activities in order to gain and retain competitiveness. The firms doesnt
involve procurement department for discussions whenever the orgarnisation strategic setting group comes into
an impasse bases on cost issues, but rather they have placed procurement as sub function of Finance department.
Finally, it was established that the firm is not keen on shifting to end-item focus which has slowed emergence of
hybrid structures and neglect emphasis on purchasing and sourcing systems development in the organisation.
The role of supply chain management on competitiveness of commercial banks operating in Kenya.
The study sought to investigate the role of supply chain management on competitiveness of commercial
banks operating in Kenya. The researcher sought to find out using the following the following model questions;
whether supply chain is a senior strategic level, whether quality is built into their supply chain, impact of supply
chain on amount of touches and touch times in supply chain transactions, if there is a built-in change
management process that constantly reviews elements of your supply chain, if there is incorporation of
suggested quality improvement and procedures for measuring quality attainment levels in the supply chains and
whether there are Clear roadmaps and plans that manages supply chain risks. From the basis of findings we can
attest that an average of 55.9% of the respondents felt that the role of supply chain management on
competitiveness of commercial banks operating in Kenya is moderate, with 23.5 %, 11.7%, 5.9% and 2.9% cited
poor and very poor, good and very good respectively.
Correlation coefficients between supply chain management adoption and strategic procurement
competitiveness.
Table 2 Correlation coefficients between supply chain management adoption and strategic procurement
competitiveness.
Supply chain
management as a
strategic level
position.
supply chain management as a

Pearson Correlation

DOI: 10.9790/487X-17217789

Quality is
built into
supply chain.

.637**

www.iosrjournals.org

Supply chain
minimizes the
amount of
touches and the
touch time.
.651**

There is builtin-change
management
process.
.697**

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Effects of Strategic Procurement on Competitiveness of Commercial Banks Operating In Kenya

strategic senor level position
Quality is built into supply
chain
Supply chain minimizes the
amount of touches and the
touch time.
There is built-in-change
management process that
constantly reviews the
elements of your supply
chain.

Sig. (2-tailed)
N
Pearson Correlation
Sig. (2-tailed)
N
Pearson Correlation
Sig. (2-tailed)
N
Pearson Correlation
Sig. (2-tailed)
N

34
.637**
.000
34
.651**
.000
34
.697**
.000
34

.000
34
1

.000
34
.981**
.000
34
1

34
.981**
.000
34
.883**
.000
34

34
.874**
.000
34

.000
34
.883**
.000
34
.874**
.000
34
1
34

**. Correlation is significant at the 0.01 level (2-tailed).

There was a positive correlation between supply chain management as a strategic senor level position
and quality built into supply chain with a correlation figure of 0.637, it was clear that there was a positive
correlation between the supply chain management as a strategic senor level position and supply chain
minimizing the amount of touches and the touch time.as shown by a correlation figure of 0.651, it was also clear
that there was a positive correlation between supply chain management as a strategic senor level position and
there is built-in-change management process., with a correlation figure of 0.697, where p = 0.000 hence
significant at 0.01 level. This shows that there was positive correlation between the variables.
From the results of the findings it was established that supply chain management is not a strategic
senior level position. In a banking set up finance, operations, human resources, risk and compliance, credit
departments and audit departments are viewed critical parts of the banking setups. SCM management is left to
the operations and sourcing department as its subsections. However quality is moderately built into their supply
chain and slowly incorporating quality into their supply chain. It was further established that supply chain
moderately minimizes the amount of touches and touch times in supply chain transactions. However the built-in
change management process does not review the element in their supply chains. This indicates that the bank has
a poorly developed continuous improvement plans to check on quality and operational efficiencies. Further it
was established that there are minimal provisions for incorporating quality improvement and procedures for
measuring quality attainment levels in the supply chains with the organisation having poor roadmaps to manage
its supply chain
The role of E-procurement on competitiveness of commercial banks operating in Kenya.
The study sought to investigate the role of E-Procurement on competitiveness of commercial banks
operating in Kenya. The researcher sought to find out using the following the following model questions; Eprocurement improvement on the organizational purchase function through cost reduction, E-procurement on
the response time to customers demand and inventory investment, Online buying on customer support and
collaboration of new product development decisions, Fast growing technology on fashion and tastes and
preferences for goods and services, Suppliers and buying firms on effective communication and Employees and
staff knowledge regarding the E-procurement and its operations. From the basis of findings we can attest that an
average of 52.9% of the respondent which is the highest had moderate feeling E-procurement has a role on
competitiveness of commercial banks operating in Kenya. However 23.5%, 11.76, 8.82 and 2.94% of the
respondents is felt it is poor, good, very poor and very good respectively.
Correlation coefficients between E-Procurement adoption and strategic procurement competitiveness.
Table 3 Correlation coefficients between E-Procurement adoption and strategic procurement competitiveness.
E-procurement
has improved on
the organisational
purchase
E-procurement has
improved on the
organisational purchase.
E-procurement is to
shorten response time
and reduce inventory
investment.
Online buying provides
customers with support
for new products

Pearson
Correlation
Sig. (2-tailed)
N
Pearson
Correlation
Sig. (2-tailed)
N
Pearson
Correlation
Sig. (2-tailed)

DOI: 10.9790/487X-17217789

E-procurement is to shorten
response time and reduce
inventory investment

Online buying
provides customers
with support for new
products
development
.790**

Employees have adequate

knowledge regarding Eprocurement and its
operations

.894**

34
.894**

.000
34
1

.000
34
.777**

.000
34
.833**

.000
34
.790**

34
.777**

.000
34
1

.000
34
.918**

.000

.000

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.788**

.000

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Effects of Strategic Procurement on Competitiveness of Commercial Banks Operating In Kenya

development
N
Employees have
Pearson
adequate knowledge
Correlation
regarding ESig. (2-tailed)
procurement and its
N
operations.
**. Correlation is significant at the 0.01 level (2-tailed).

34
.788**

34
.833**

34
.918**

34
1

.000
34

.000
34

.000
34

34

There was a positive correlation between E-procurement improvement on the organisational purchase
and E-procurement shortening of response time and reduce inventory investment with a correlation figure of
0.894, it was clear that there was a positive correlation between the E-procurement improvement on the
organisational purchase and online buying providing customers with support for new products development as
shown by a correlation figure of 0.790, it was also clear that there was a positive correlation between Eprocurement improvement on the organisational purchase and employees having adequate knowledge regarding
E-procurement and its operations with a correlation figure of 0.788, where p = 0.000 hence significant at 0.01
level. This shows that there was positive correlation between the variables.
It was established that E-procurement has moderately improved on the organisational purchase function
through cost reduction and reduce on turnaround time of purchases and inventory investment. E-procurement is
slowly being introduced to the banks with the main aim of cost cutting and reducing the turnaround time.
However online buying provides support to customers and collaboration for new product development decisions
though customers has not embraced online buying. However the fast growing technology has not only attracted
commercial banks trends and rails but also on tastes, preferences and fashion growing technology. With
communication between suppliers and buying firms has not able effect timely their E-procurement system is not
well utilised, this may be due to lack of adequate knowledge regarding E-procurement and its operations
amongst staff and employees.
The role of supplier relationship management on competitiveness of commercial banks operating in
Kenya.
The study sought to investigate the role of supplier relationship management on competitiveness of
commercial banks operating in Kenya. The researcher sought to find out using the following the following
model questions; The firm on supplier development and partnership, developed supplier relationship
management program, advice from suppliers regarding key purchases on its indirect purchasing, suppliers are
treated as partners and others as single transactions, Regular review of current suppliers and supplier database to
capture tacit supplier knowledge and SRM practices and performance role in reducing procurement costs. From
the basis of findings we can attest that an average of 64.7% felt that the organization is very poor in adoption
and implementation of supplier relationship management strategies towards creating a competitive advantage,
with 20.6%, 5.9%, 5.9% and 2.9% indicating poor, moderate, good and very poor respectively.
Correlation coefficients between SRM adoption and strategic procurement competitiveness.
Table 4 Correlation coefficients between SRM adoption and strategic procurement competitiveness.

The firm has a welldeveloped SRM program.

The firm has a

SRM program
which is well
developed
1

Pearson
Correlation
Sig. (2-tailed)
N
34
The firm believes in
Pearson
.894**
supplier development and
Correlation
partnership.
Sig. (2-tailed)
.000
N
34
The company usually
Pearson
.871**
seeks advice from
Correlation
suppliers.
Sig. (2-tailed)
.000
N
34
Suppliers are treated as
Pearson
.882**
partners and others as
Correlation
single transactions
Sig. (2-tailed)
.000
N
34
**. Correlation is significant at the 0.01 level (2-tailed).

DOI: 10.9790/487X-17217789

The firm believes

in supplier
development and
partnership
.894**

The company
usually seeks
advice from
suppliers
.871**

Suppliers are treated

as partners and others
as single transactions
.882**

.000
34
1

.000
34
.822**

.000
34
.943**

34

.000
34
1

.000
34
.817**

.000
34
.943**

34
.817**

.000
34
1

.000
34

.000
34

34

.822**

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Effects of Strategic Procurement on Competitiveness of Commercial Banks Operating In Kenya

There was a positive correlation between the firm having a well-developed supplier relationship
management program and the firm believing in supplier development and partnership with a correlation figure
of 0.894, it was clear that there was a positive correlation between the firm having a well-developed supplier
relationship management program and the company usually seeking advice from suppliers as shown by a
correlation figure of 0.871, it was also clear that there was a positive correlation between firm having a welldeveloped supplier relationship management program and Suppliers being treated as partners and others as
single transactions with a correlation figure of 0.882, where p = 0.000 hence significant at 0.01 level. This
shows that there was positive correlation between the variables.
It was established that the firm does not believe is supplier development and partnership with the aim
of benefiting from innovation instead the kind of their relationship is adversarial. It was further evident that
SRM program was not well developed with the firm rarely seeking advice from suppliers regarding key
purchases in its indirect purchasing. The firm is very poor when it comes to reviewing of current suppliers and
supplier database to capture tacit supplier knowledge. However it was learned SRM practices and performance
is not well capitalised in reducing procurement costs in the organisation.
Performance of Procurement Department.
The study sought to investigate the role of procurement in contributing towards competitiveness of
commercial banks operating in Kenya. The researcher sought to find out using the following the following
model questions; Procurement of goods on time, Procuring goods of the right quality, maintaining good
relationships with suppliers, sharing information with user department and Performance monitoring. Most
respondents 44.1% felt that performance of procurement department is poor, very 29.4% of the respondents
indicated very poor. With 17.6% citing it moderate, 5.9% feeling it was good and 2.9% of the respondents
indicating very good.

V.

Conclusions

The study therefore concludes that;

i.
This study reveals that the strategic sourcing role does not account for potential sourcing approaches
considering the commercial strategy, the strategic importance and financial relevance of the item to be
sourced and the supplier market conditions.
ii.
Strategic sourcing is not utilized in effective value creation. They are poor in identifying key saving
potential areas and driving innovative sourcing models which can enable operators to reinvent their cost
structures i.e. turning traditionally fixed costs into variable through outsourcing models.
iii.
From the study supply chain management has never assumed a significant importance and has never
called for serious attention, as companies are challenged with finding ways to meet ever-rising customer
expectations at a manageable cost. Customers are calling the shots, with commercial banks in Kenya
scrambling to meet customer demands for tastes, preferences, features, quick order fulfillment, and fast
delivery. Service delivery and good interest rates a long-time competitive differentiator - is approaching
parity across the board, so meeting customers specific demands for product delivery has emerged as the
next critical opportunity to gaining competitive advantage.

iv.
v.

vi.
vii.

viii.

From the findings, the bank faces particular organizational and capability challenges in delivering
systematic savings in external spend. The main drivers behind this are the presence of decentralized
structures and unclear governance issues regarding procurement.
The banks nature of relationship with suppliers is short term and adversarial (win-lose situation). They
prefer transactional relationship than mutual relationship where suppliers are developed, supported and
grown. Suppliers are a good source of market information and trends, innovation. Suppliers tend to
control entire supply chain of goods in the market. The bank tends to miss a lot on information regarding
current market developments and trends, innovation, external spend and advice regarding the market
volatility.
There is poor governance structure to ensure ownership and gain traction with senior management and
entire user department. There is no independent procurement office role to transform and establish
procedures for managing relationships with suppliers and implementing procurement guidelines
Most of the commercial banks operating in Kenya have adopted the e-procurement system even though
several procurement functions are still carried out in the traditional manual system. Some of the functions
that are yet to be done through the e-procurement system include: online tendering, online submission of
proposals and advertisement or required items online.
E-procurement is associated with a number of effects on the performance of commercial banks operating
in Kenya. Among these effects include: real-time response to both the customers and the market;

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Effects of Strategic Procurement on Competitiveness of Commercial Banks Operating In Kenya

improves transparency and accountability; improves information flow in the supply chain; assists the
bank in reducing costs and improvement in competitive bidding and sourcing. However there is
underinvestment in E-procurement expertise due to the perception of top executives regarding
procurement while overlooking other key banking sectors like marketing, lending and customer services.

VI.

Recommendations

The study therefore recommends the following measures to be undertaken by SCBK:

i.
They need to lay more emphasis on the strategic sourcing role so as to carefully account for potential
sourcing approaches considering the commercial strategy, the strategic importance and financial
relevance of the item to be sourced and the supplier market conditions.
ii.
There is need to identifying key saving potential areas and driving innovative sourcing models which can
enable operators to reinvent their cost structures. For example by turning traditionally fixed costs into
variable through outsourcing models so as to contribute to effective value creation.
iii.
Supply chain management practices, tools and techniques needs to be relooked into with significant
importance and must call for serious attention, when it comes to strategy development and seeking advice
regarding external market environment and be involved in the strategy formulation.
iv.
They need to centralize its structures and develop clear governance issues regarding procurement.
However the bank needs to benchmark especially from non-banking institutions regarding supply chain
operations and practices in order to manage its organizational and capability challenges in delivering
systematic savings in external spend.
v.
The bank should have a good supplier relationship management with suppliers so as to create a long
lasting relationship based on a win-win situation, where the firm will benefit from crucial information
regarding the market and innovation and also be able to curb goods and material shortages, supply chain
risks, inventory costs and handling costs.
vi.
Align the governance structure to ensure ownership and gain traction with senior management and entire
user department. However create an independent procurement office role, transform and establish
procedures for managing SRM and implementing policies. Finally, monitor business demand and cost
saving initiatives to ensure the successful procurement function through SRM.
vii.
Employees need to be trained on usage of the e-procurement system. This will enable them to
operationalize the system and also put more resources and support to the E-procurement team so that they
may realize full potentials of procurement.
viii.
The study revealed that despite the fact that most commercial banks operating in Kenya have adopted the
e-procurement system, some procurement activities are still handled manually. There is need to
emphasize on the need to carry out all the procurement functions through e-procurement. However there
is also need to integrate the various functions so that e-procurement can thrive. They need to regularly
update the website with the latest information regarding procurement activities. Suppliers should be
encouraged to summit their quotations online.

Acknowledgements
Conducting a study of this nature was not possible without the help and support of a range of
individuals and organizations. I would like to thank my supervisor Dr. Fred Mugambi for his enormous
contribution to this project through guidance, Jomo Kenyatta University for giving me an opportunity to study
and Standard Chartered Bank Kenya, staff and colleagues for their cooperation and moral support.
My honest and sincere gratitude goes to my parents Mr. and Mrs. Fredrick Tarus, without their material
support, good upbringing and encouragement this work would not have been accomplished also wish to
acknowledge and sincerely thank; my class mates Merreck Ataya, Timothy Kimani and David Wanjala for their
unending moral support throughout my study.

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